Real and Relative Wage Rigidities: Wage Indexation in the Open Economy Staggered Contracts Model

Pertti Haaparanta

No wp-1986-007, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: The overlapping wage contract model, known as the staggered contract model, is expanded in an open economy context to include wage indexation to add some more realism to the model. In addition the effects of alternative assumptions about availability of information in wage negotiations are studied. It is shown that in the case of shocks in domestic costs indexation can improve economic stability if demand for the domestic good is price inelastic and wage negotiations are not sensitive to cyclical conditions.

Keywords: Labour contracts; Macroeconomics; Wages (search for similar items in EconPapers)
Date: 1986
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Citations: View citations in EconPapers (2)

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